At the suggestion of Skater and Ozperp in the thread on Trusts, I will relate the story of an IP gone wrong. It feels a bit out of place in the middle of all of your spectacular successes. Even though this occurred many years ago, maybe our mistakes will help others.
This is in no way a self pitying sob. My line of work makes me grateful every day that we have good health, happy down to earth kids and a roof over our heads (albeit a rented one).
Here goes:
Mr A and I started our property life in the USA with nothing - the scratch around behind cushions looking for bus money kind of nothing.
We bought a PPOR (easy to get a loan in the USA, as now the world knows) and from that equity moved along fairly fast to owning resi buy/hold IP's. I was the one passionately interested in houses, design and research. Mr A has never been interested in property and just signed on the dotted line.
(Digression: this may surprise many Aussies but most Americans just don't "get" property. In the decades I lived there I did not have one conversation about property with any friend. They invest in property almost reluctantly - because their accountants tell them to. Cash flow is what they pull out of the wall every week with their piece of plastic).
In the late 80's/early 90's Mr A was pulling in buckets of money from his tech related work. These were the heady days of tech development and people were cashing in stock options every few months worth $2/300K.
We were living very well indeed.
Rather out of the blue, Mr A announced that he was buying a property purely as a tax deduction to offset the huge income. My protests were put down as the incoherent ramblings of a 10 month pregnant woman. Alarmingly, it was agri-commercial, a completely different area to resi. It blew up because he and his lawyer misinterpreted a tiny clause in the fine print of the sale documents to do with a complicated area of water rights.
There was a court case. Mr A lost. We had to liquidate everything except our PPOR to pay the legal fees.
We picked ourselves up, dusted off, and started over, but Mr A refused to buy further properties. He switched to the stock market. Then came the dot com bust...
At this point, I'll stop because what comes afterwards is not property related. We have had minor booms and busts ever since and do not currently own any property. The hundreds of thousands of $$ in legal fees would translate to millions in "lost opportunities" because there have been 2 significant RE booms in Ca since that time and the area we were investing in has barely had a dent in it from the current housing meltdown.
The mistakes are pretty obvious but to clarify:
1. We didn't think of asset protection and didn't ask advice as to what legal structure would be appropriate.
2. Buying for tax deductions instead of CG
3. Investing in something we did not understand.
4. Expecting a general run of the mill property lawyer to understand a complicated area of property law.
5. Wanting to fight something in court rather than just paying up to settle, even though you think you are right.
6. For me, not insisting that we get right back into property. I beat myself up over this one, regretfully.
7. ? There's probably more that I'll think about at 3 am.
I hope someone finds this useful.
Later I'll post where we are at and ask for some advice. I have the purse strings now. There isn't much in the purse but I still love property.
This is in no way a self pitying sob. My line of work makes me grateful every day that we have good health, happy down to earth kids and a roof over our heads (albeit a rented one).
Here goes:
Mr A and I started our property life in the USA with nothing - the scratch around behind cushions looking for bus money kind of nothing.
We bought a PPOR (easy to get a loan in the USA, as now the world knows) and from that equity moved along fairly fast to owning resi buy/hold IP's. I was the one passionately interested in houses, design and research. Mr A has never been interested in property and just signed on the dotted line.
(Digression: this may surprise many Aussies but most Americans just don't "get" property. In the decades I lived there I did not have one conversation about property with any friend. They invest in property almost reluctantly - because their accountants tell them to. Cash flow is what they pull out of the wall every week with their piece of plastic).
In the late 80's/early 90's Mr A was pulling in buckets of money from his tech related work. These were the heady days of tech development and people were cashing in stock options every few months worth $2/300K.
We were living very well indeed.
Rather out of the blue, Mr A announced that he was buying a property purely as a tax deduction to offset the huge income. My protests were put down as the incoherent ramblings of a 10 month pregnant woman. Alarmingly, it was agri-commercial, a completely different area to resi. It blew up because he and his lawyer misinterpreted a tiny clause in the fine print of the sale documents to do with a complicated area of water rights.
There was a court case. Mr A lost. We had to liquidate everything except our PPOR to pay the legal fees.
We picked ourselves up, dusted off, and started over, but Mr A refused to buy further properties. He switched to the stock market. Then came the dot com bust...
At this point, I'll stop because what comes afterwards is not property related. We have had minor booms and busts ever since and do not currently own any property. The hundreds of thousands of $$ in legal fees would translate to millions in "lost opportunities" because there have been 2 significant RE booms in Ca since that time and the area we were investing in has barely had a dent in it from the current housing meltdown.
The mistakes are pretty obvious but to clarify:
1. We didn't think of asset protection and didn't ask advice as to what legal structure would be appropriate.
2. Buying for tax deductions instead of CG
3. Investing in something we did not understand.
4. Expecting a general run of the mill property lawyer to understand a complicated area of property law.
5. Wanting to fight something in court rather than just paying up to settle, even though you think you are right.
6. For me, not insisting that we get right back into property. I beat myself up over this one, regretfully.
7. ? There's probably more that I'll think about at 3 am.
I hope someone finds this useful.
Later I'll post where we are at and ask for some advice. I have the purse strings now. There isn't much in the purse but I still love property.